The EPA’s Proposed Power Plant Rule: Will it Survive in the Courts?

September 25, 2023 at 1:00 PM ET

In May, the EPA proposed a new rule to regulate greenhouse gas emissions from new and existing power plants. This is EPA’s third attempt to regulate these emissions.  The Supreme Court struck down the Obama administration’s Clean Power Plan in West Virginia v. EPA, which was the first time the Court formally acknowledged and explicitly relied on the “major questions” doctrine. The DC Circuit had previously struck down the Trump Administration’s Affordable Clean Energy Rule and, although West Virginia involved an appeal of that decision, the Supreme Court did not rule on the Trump Administration’s rule.

The new rule’s supporters say it’s well in line with EPA’s statutory authority, the state of the electric markets, and available emissions-reduction measures. Its opponents say it is legally flawed and threatens grid reliability.  What are the potential legal and policy issues associated with the proposed rule?  Does it raise “major questions” issues? Is the agency relying upon unproven technology in violation of the statutory requirement that its standards be based only on the “best system of emission reduction” that “has been adequately demonstrated?” Does this rule violate state prerogatives for regulating existing sources?  Join us as we explain the rule and then discuss the legal and policy issues it raises.


Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.

[Music and Narration]


Introduction:  Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker.


Sarah Bengtsson:  Good afternoon, and welcome to this Regulatory Transparency Project webinar. My name is Sarah Bengtsson, and I’m Associate Director of RTP of The Federalist Society.

Today, September 25, 2023, we are pleased to host a discussion on “The EPA’s Proposed Power Plant Rule.” Please note that, as always, all expressions of opinion on today’s program are those of the speakers.


After the discussion, our panel will take audience questions, so please submit those questions into the Q&A function at the bottom of your Zoom window.


Our moderator for today’s discussion is Daren Bakst. Daren is Director of the Center for Energy and Environment at the Competitive Enterprise Institute, where he’s also a Senior Fellow.


If you’re interested in learning more about our speakers, you can read their full and impressive bios at

Thank you all for joining, and with that, I’ll hand it over to you, Daren. 


Daren Bakst:  Thank you, Sarah. 


Good afternoon. My name is Daren Bakst, as Sarah said, and I am Director of the Center for Energy and Environment at the Competitive Enterprise Institute.


I want to thank you for joining us today as we discuss the EPA’s new proposed power plant rule to regulate greenhouse gas emissions from these new and existing power plants. This is the EPA’s third attempt to regulate these emissions.


Attempt one was the Obama administration’s Clean Power Plan, which the Supreme Court struck down in West Virginia v. EPA. That case is especially important because it was the first case which the Court formally acknowledged the major questions doctrine. In simple terms, there are some extraordinary cases that require there to be a clear statement of authority from Congress for the agency’s assertive power, given the scope and significance of the power asserted by the agency. As the Court explained, “Thus, in certain extraordinary cases, both separation of powers principles and a practical understanding of legislative intent make us ‘reluctant to read into ambiguous statutory text’ the delegation claimed to be lurking there.” So that was attempt one.


So attempt two was the Trump administration’s Affordable Clean Energy Rule, or ACE Rule. In 2019, the EPA replaced the Clean Power Plan with the ACE Rule. D.C. Circuit struck down the ACE Rule, and it’s in a sort of limbo. EPA has delayed its implementation, and no one seriously expects it’ll ever come into effect.


So now we’re dealing with attempt three, the Biden administration’s proposed rule that has no catchy name. The rule was published in the Federal Register on May 23rd, and the hot comment period ended on August 8th. That was recently on, and its proposed rule has received over 1.2 million comments. So maybe there’s a lot of form comments out there, but, regardless, there’s a lot of interest in this rule, as there should be.


So let’s get right to it. And I’m honored to be joined by three leading experts. And their bios can be found on the event webpage, as Sarah said.


Jeffrey Holmstead is a partner at Bracewell LLP and formerly headed the EPA’s Office of Air and Radiation. 


Kevin Poloncarz is a partner at Covington & Burling LLP, and he co-chairs the firm’s Environmental and Energy Practice Group, Energy Industry Group, and ESG Practice.


And Justin Schwab is founder of CGCN Law, PLLC. And he served as Deputy General Counsel at the EPA.


To start our program, Jeff will provide an overview of the proposed rule, including some of the background leading up to the rule. Kevin and Justin will then each provide their perspective on the legal and policy implications of the rule. We’ll then have a discussion to help flesh out these issues, and that will include taking your questions. So, please, do submit your questions, and I can try to incorporate them into the discussion.


So, Jeff, let me turn the program over to you to provide an overview of the rule.


Jeffrey Holmstead:  Great. Thank you.


I suspect that most of the listeners, most of the participants are at least somewhat familiar with the rule. Let me just do a quick bit of background and explanation to set up the discussion.


Since 1970, Section 111 has been a major part of the Clean Air Act. At least Section 111A has been an important part of the Clean Air Act because it was under that section that EPA sets what are called New Source Performance Standards. And EPA identifies a type of industrial source known as a source category. Then it sets standards of performance that any new source in that category has to meet. That program is typically called the NSPS Program.


Under certain conditions, EPA can also require states to set standards of performance for existing sources in that same source category. In both cases, these standards of performance are supposed to be based on — in fact, I think this language is important because I suspect we’ll be coming back to it again and again. But, whether you’re talking new plans or existing plans, “the ‘standard of performance’ means a standard for emission” reductions of — “for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impacts and energy requirements) the Administrator determines has been adequately demonstrated.”


So this recent proposal is designed to establish Section 111(a) limits for new fossil fuel power plants and to require states to set standard performance for existing fossil fuel power plants within their states. 


And I won’t go too much into the history of the Clean Power Plan because it’s been much talked about. I suspect most people are familiar with it. But, ultimately, what the — what EPA did that the Supreme Court struck down is the agency said, “Look. The most cost-effective way to reduce emissions from the power sector is to shift generation away from coal and natural gas plants to other types of cleaner generation,” mostly, in EPA’s view, wind and solar but also nuclear power plants were among those that were recognized. And the idea behind the Clean Power Plan was explicitly to shift generation away from the higher-polluting plants to much lower CO2 sources of emissions. The Supreme Court said, basically, that that sort of generation shifting was beyond EPA’s authority because Congress had not clearly given that type of authority to EPA. 


The new proposed regulation was clearly drafted with that in mind, and the agency explicitly followed what it says is its traditional approach for setting these standards by identifying systems of emission reduction that can be applied to an individual source and can be used to reduce emissions from that source. Now, we’ll talk, probably, more about what those are. But EPA very clearly designed this to avoid the problems that came up with the Clean Power Plan.


I think, in doing that, in addition to avoiding the explicit generation shifting, their intention was to try to put this — to create issues where the courts typically defer to EPA. The EPA has a long history of identifying best systems of emission reductions that can be applied on individual power plants, and I think the expectation is that courts, by and large—and this is true over the years—have deferred to EPA’s technical expertise in this area.


But the systems of emission reduction that EPA has identified are really not in existence. And we can talk more about the details of that. But for coal-fired power plants, the agency identified carbon capture and sequestration, CCS technology, as the best system of emission reduction, and, unless the coal-fired power plant agrees, makes a binding — legally binding commitment to shut down by 2040, it has to install CCS by 2030, which is kind of around the corner in terms of utility planning. But that was — that was the standard for existing coal-fired power plants. 


For existing gas-fired power plants, the standard was a choice between either carbon capture and sequestration or coal firing with what they call low-GHG hydrogen. And, again, I’m not going to get into all the details, but, basically, for large plants that are frequently used, to find those 300 megawatts or more that are used 50 percent of the time, they have to either install CCS by 2035, or they have to begin using low-GHG hydrogen in 2032 and continuing on to a step down in 2038. 

For new gas-fired power plants—which I think is an enormously important issue—it was again based on either CCS or the use of low-GHG hydrogen. And the time frame is essentially the same that you can build your plant now. And, between now and 2032, you just have to operate based on modern technology: high-efficiency gas turbines. But you either have to install CCS by 2035, or you have to begin using low-GHG hydrogen in 2032. And, again, it’s a bit more complicated than this because there’s different standards depending on the expectation for how much those plants are going to be around.

So that is maybe a too-quick summary of what the rule does. There are three or four major issues that I look forward to discussing with Kevin and Justin.


Daren Bakst:  Thanks so much, Jeff. That was great.


And now what we’ll do is we’ll turn to Kevin and Justin for their perspectives.


And, Kevin, why don’t we start with you on your perspective on the rule?


Kevin Poloncarz:  Great. Well, thank you so much for having me. 


As somebody who has spent a long time defending EPA’s authority to establish greenhouse gas standards, I usually speak to different audiences than The Federalist Society. I teach climate law and policy at Stanford Law School. And I think that it’s critically important that we be able to have forums like this where we can respectfully disagree with one another. And so, I really appreciate the invitation.


I just wanted to take a step back and talk about — we’ve been at this task of trying to think about, since Mass v. EPA, how EPA should be regulating greenhouse gas emissions as a regulatory endeavor, as something that is done pursuant to the Clean Air Act. We’re primarily air lawyers on this call. And what we have now, in the wake of the passage of the Inflation Reduction Act, is a whole new approach to addressing climate change in the U.S. through tax incentives. And it’s because of the Byzantine process budget reconciliation that we’re able to get a bill passed with a bare majority without being subject to the cloture rule.

But what we have now, as opposed to the sticks that EPA would usually wield in order to drive greenhouse gas reduction, is we have a lot of carrots. We have once-in-a-generational investments out there, whether it’s $369 billion — the funds aren’t limited. It could be as — credits we set as much as $800 billion in investment in emission reduction. And there are some really critical tools for the power sector in those investments, and those include the 45Q tax credit for carbon capture and storage and the 45D tax credit for qualified clean hydrogen. And these are driving massive investments across our economy in devising a method of delivering these products—green hydrogen—and making available CCS for a variety of sectors beyond the power sector.


And what EPA has done in this proposal is they’ve said, “Congress made these tools available” — and, in fact, some of the authors of the Inflation Reduction Act said they specifically contemplated that CCS and qualified clean hydrogen would be available for EPA to consider as part of the best system. And EPA has said, “We’re going to look out over the time horizon when this bill gets implemented”, the IRA gets implemented, “and we’re going to see dramatic changes happening in the power sector. And we’re going to say that if you want to continue operating your big coal plant past 2040, you need to take advantage of some of these incentives.” 


And the same thing holds for gas-fired power plants. They’re going to be playing — they’re going to continue to play a critical role for decades. EPA acknowledges that fossil generation can’t just go away and is going to be necessary in order to backstop all the renewable generation. But they’re saying, “If you want to continue operating your gas plant at a high-capacity factor, you’re going to need to install some controls.” And so, that’s kind of the framing of the big picture, from my perspective, of what EPA is doing here.


And we can talk about how that reflects the contours of the statute and their regulatory determinations but just wanted to provide that initial framing.


Daren Bakst:  Thanks, Kevin. That’s great.


Justin, we’ll turn it to you.


Justin Schwab:  Thank you for having us. 


I want to echo Kevin if I may — Kevin’s remarks. Kevin’s been an able defender of the Clean Power Plan, and, I presume, now this proposal, in all frankness, sometimes more able than some of the folks whose official duties it is to do that. So thank you very much for joining us. It’s an honor to be here with you all.


This proposal, unfortunately, suffers from similar fundamental defects to those in the Clean Power Plan. I think that EPA, in this proposal, and its backers in regulated community in civil society have just gotten too hung up on this fence line question. And they’ve convinced themselves that as long as they can claim that this rule stays “inside the fence line,” that is, as long as the rule and proposal identifies systems of emission reduction only measures that can be characterized as applying to and at the level of individual plants, that they’re in the clear. 


Now, there are actually arguments available that both carbon capture and “low-GHG hydrogen” are not plant-specific measures — and maybe we’ll get into that later, but let’s set that aside for now. I think a close reading of the West Virginia opinion reveals that what SCOTUS really found to be an excess of EPA’s authority under Section 111 wasn’t just the cap-and-trade form of the regulation, but the regulation’s goal. And that goal in the Clean Power Plan was forthrightly to adjust the nation’s electric fuel mix at the aggregate level. 


Now, this new proposal pays lip service to renouncing that goal. But for reasons we’ll discuss later in the hour, I just don’t think that renunciation is credible. But let’s zoom in on the statutory language that Jeff teed up of “adequately demonstrated.” And let’s look at EPA’s own gloss on what it thinks “adequately demonstrated” means.


For those who want to follow along at home, this is on pages 33,272 to 33,273 of this year’s volume of the Federal Register. This passage of EPA’s proposal cobbles together snippets from D.C. Circuit case law. Most of it’s pretty old by now, and precisely none of this case law has anything to do with existing source regulation. So this is a crucial point. There is still no substantive case law on how prescriptive EPA can be on the existing source side because 111D, as in David, the existing source provision, was a rarely used backwater until fairly recently. And all the attempts to use it more recently on the utilities sector have been struck down or halted for reasons having nothing to do with the state side as such.


So EPA picks up here on the D.C. Circuit, having held that EPA is allowed to make reasonable projections as to the course of technological development so that EPA can set a standard that no existing plant can actually meet right now. So the D.C. Circuit has squarely held as much for new sources. 


Most of these opinions explicitly say that this kind of technological nudging is allowed because the regulations at issue were dealing with new sources, not existing ones. So right there, that means that none of this case law, on its face, applies on the existing source side. And EPA doesn’t even acknowledge that fact in the proposal. So this is a major, major flaw in their claim to authority on the existing source side right from the get-go. 


So, even on its own terms, the D.C. Circuit case law speaks of maybe a two- or a three-year window for this projected nudge. That’s nothing like the 15-year-plus plan that we see here in this proposal. So there is some very wonky, weedy reasons why the D.C. Circuit case law is questionable. We can get into that if you want. But the bigger point here is that no court has ever blessed anything that looks anything like this 15-year plan. And EPA can’t identify any prior rule that it’s done where its projection of when the system of emission reduction will become fully available stretches out anywhere near this far. So there’s a structural problem with the statute here for EPA. 


Congress, in 111(b), as in Boris, said that EPA must review its new source standards at least every eight years to see if they’re still adequate. That should set a presumptive outer limit of any ability to bake in any kind of technological projections into a rule, even on the new side. And, in fact, EPA seems to have almost or virtually almost always stayed well within that eight-year window in terms of its compliance build-out and its phase-in of a new source rule. Again, EPA’s proposal just does not engage with the implications in this regard of the review provision at all. 


EPA, in its exegesis on “adequately demonstrated” in the pages that I cited, openly says it can set a ramp for when these supposedly “adequately demonstrated” technology will, in fact, become available as long as it wants, as long as it can project a date certain when the technology in question will be available. And it says it can do the same for its projections, not just at the technology, but of any ancillary infrastructure, including, but not limited to, pipelines, when that will be available and constructed with, again, no limit on the time depth or the industry breadth of these projections. 


EPA also openly says that it can issue these regulations as a “essential trigger for the sometimes-lengthy process of implementing pollution controls,” which is a nice way of saying it has command and control authority over the economy to just will into being adaptation of technologies that are not now ready and will never be ready for more than three presidential terms out into the future. If that’s “adequately demonstrated,” those words have no meaning. 


EPA’s only fallback argument here is to say, “Don’t worry. We have to be “reasonable” in all of these projections and requirements.” Well, that’s very similar to what it said in defense of the Clean Power Plan. “Reasonableness” is the indispensable background principle of judicial review of a regulation. “Reasonable” is not a mantra that the agency can utter to insulate its own actions from proper review. So, in that way, this really is the Clean Power Plan all over again.

So, just in closing, I’d like to suggest a way to think about this. The Clean Power Plan argued from an absence of restriction and an absence of express prohibition in the statute to say that there was no horizontal limit on its authority to design a regulation that roped in other sectors in a cap-and-trade scheme or other nonregulated generation sources such as wind and solar into a cap-and-trade scheme to regulate the whole grid as such. This proposal similarly argues, from an absence of explicit prohibition in the statute — says there are no vertical limits on its planning authority and how long it can plan out a ramp when, again, supposedly a system that “has been adequately demonstrated” will, in fact, be ready for prime time. 


The better reading of the understanding of “adequately demonstrated” is that it means that a technology has a proven track record, and it’ll soon be available at scale. So “proven track record” is what Justice Kagan said in her gloss on the statute in the dissent in West Virginia. And I think if you read that, that suggests that the entire Supreme Court has a narrower understanding of EPA’s authority than EPA has in this — under this provision. 


And so, in the same way that the fact and the Clean Power Plan that states or planning authorities or companies were engaged in generation shifting planning did not confer on EPA the authority to make that a regulatory requirement, I think so, too, here the fact — and we’ll get into this in detail later, but the fact that Congress has ordered up almost a trillion dollars—I just heard—of subsidies under its spending authority does not confer regulatory authority on EPA to make that a binding regulation on companies, let alone on the states through the existing source side. 


Daren Bakst:  Thank you, Justin. 


So I think now let’s just get to a discussion. And, again, if you have questions, please submit those questions. And I’ll start off and kind of cut to the chase because I think there’s one question that I think a lot of us probably have. And this was touched on some already. But let’s flesh it out some: Does this proposed rule raise major-questions issues? And, when you answer that, can you explain how the proposed rule is similar or different from the Clean Power Plan?


And, Jeff, let’s start with you. Jeff, you’re on mute.


Jeffrey Holmstead:  You’d think after three years, I would have learned I needed to click that button.


As I said at the outset, EPA clearly had that doctrine in mind when they wrote this rule. And so, I think their theory is that they’ve managed to avoid any problems with major questions. The major questions doctrine has not been terribly well-defined at this point, so we’re looking at a variety of factors that the courts might consider. 


I would say that I think they have a big problem because, even though they don’t explicitly use generation shifting as their control technology, they acknowledge that that will be the result of this regulation. In fact, it’s a much more — it would be a much more aggressive regulation in terms of the required admission reductions than the Clean Power Plan. So EPA’s own modeling shows that very, very few plans, even based on EPA’s assumptions, would actually install these control technologies that EPA has identified. And virtually all of them would shift to wind and solar and nuclear and other forms of generation. So I think that in and of itself is an issue.


I also think — and you didn’t ask this question, but I’ll answer it anyway. Is the Supreme Court likely to take up this case? And the fact that there’s 1.2 million comments, I don’t think is necessarily relevant. I always like to look at the number of substantive comments. But if you look at the number of substantive comments, it’s still very impressive and virtually every industry trade group views this as enormously important. So, by that fact, that’s not a reason that it would trigger the major questions doctrine, but there certainly is an indication that this is enormously important throughout the whole industrial — all the industrial sectors of the United States.


Daren Bakst:  Thanks, Jeff.


And, Kevin, what’s your take on that?


Kevin Poloncarz:  The Supreme Court said that the major questions doctrine applies in extraordinary cases. And the Clean Power Plan truly was something transformative of EPA’s authority, where it was not doing as it had typically done. It was not looking at the available technologies that plants could apply. It was looking at how the electricity system itself could be transformed. Here, EPA is looking into its toolkit, its long-held toolkit of projecting what technology is available, what technology is coming online, and saying, “We can make some projections about the availability of that technology and what it can achieve.” 


And there is 50 years of precedent in the D.C. Circuit. And Justin is correct that those cases, predominantly, they all relate to 111(b) for new sources. However, there’s no gloss in them that suggests that the statute means something different when it speaks in the same terms of the best system of emission reduction that has been adequately demonstrated. 


What the Supreme Court found offensive about the Clean Power Plan was that EPA arbitrarily decided the amount of appropriate coal-fired generation and then devised these caps in order to achieve that goal without reference to any objective criterion they said, unlike an ambient air quality standard. And here, EPA is using objective criteria of what technology is available for these existing and new fossil units that they could apply over the course of the next couple decades in order to achieve emission reductions. 


And Justin is correct that typically the lead time that is afforded is fewer years than 15 years. Although, in Jeff’s administration, they proposed a rule under 111(d) — they finalized a rule under 111(d) for mercury emissions from this sector that projected that technologies would be more broadly deployed 13 years from now from when the rule was finalized, and therefore they could set more stringent budgets for those future years based upon the availability of that technology. So this is very similar to what EPA has historically done. 


And I agree with Jeff that the rule has been carefully crafted to try to avoid the major questions doctrine. Of course, this question is politically and economically significant. And that is one criteria that the Supreme Court suggests determines whether or not a question is indeed major. But I don’t think that’s enough. The Supreme Court can’t — every case can’t be extraordinary. Every case concerning this provision of the statute can’t be extraordinary. EPA is not engaging in power system engineering here. What they’re doing is setting technology-based standards. 


And the baseline already projects that there’ll be 117 or 118 gigawatts of retirement of coal-fired generation. And this just nudges it a little bit more — 17 additional gigawatts of retirement from the baseline. And that fits squarely in the type of what the Supreme Court preserved role for EPA to set standards that incidentally might cause generation to shift. They were very decisive in that respect. And so, from my view, this rule does not suffer from any of the deficiencies that the Supreme Court ascertained in the Clean Power Plan.


Daren Bakst:  Thank you, Kevin. 


And, Justin, let me give your — get your take real quick.


Justin Schwab:  I was just thinking on the major questions. So when the agency repealed the Clean Power Plan in the summer of 2019, it did not do so relying on the major questions doctrine. It went through a more traditional vanilla statutory interpretation analysis, said this demonstrates that generation shifting cannot be a valid system of admission reduction under the meaning of the statute. 


And then the agency looked at two clear statement canons to confirm—not to rely on, to confirm—that. One was the federalism canon, which I hope we’ll get into on the state planning side for existing sources. The other was the major questions doctrine, which, up to that point, the Supreme Court did not actually recognize, at least not under that name. 


I think Justice Barrett’s solo, I think, concurrence in the student loan case from the last term adopts a somewhat similar lens. And she, in implicit dialogue with Justice Gorsuch — Justice Gorsuch feels this is very much a prophylactic constitutional measure. Justice Barrett, on the other hand, says, “No. This is really just mouseholes. We’ve always known that there are some ways that are not rational to read the statute, and that’s what we’re applying here.”


So I think, similarly, I wouldn’t advise folks to hang their hat entirely on major questions. I would advise folks to look to this more through a vanilla lens and then see whether major questions informs that lens as a way to think about what might happen in the Supreme Court if it goes there.


But in terms of “every action can’t be extraordinary,” that’s certainly true. On the other hand, the Supreme Court said this was for extraordinary cases after having done it twice earlier that term in the OSHA vaccine mandate case and in an extraordinary posture at the beginning of the term, or maybe right before the beginning of the term, in the eviction moratorium case. So this court appears to believe that these extraordinary cases are coming more often, and so that’s why it might invoke it.


Now, this really comes down to what you think the nature of the major questions doctrine is. Does it just look at sticker price? Is a little nudge okay? Or, instead, does it look at the implications and breadth and limitlessness of the theory of authority that the agency’s operating under? And, again, EPA’s very plain. There are no limits, other than baseline rationality, on how long and how detailed a plan it can envision for when technology will actually become available. And that sort of thing, I think, is dangerous territory if you’re trying to avoid a reviewing court from looking at major questions.


Very quickly on the Clean Air Mercury Rule in 2005. It is true that some aspects of that compliance did go out as far as ’13, as Kevin — 13 years in the future from that rule, as Mr. Poloncarz noted, but the Supreme — similarly in the Clean Power Plan, the defenders of the Clean Power Plan invoked the Clean Air Mercury Rule to say, “This isn’t new. There is precedent.” And that did not deter the majority in West Virginia at all.


Also of note, the agency in 2019, when it repealed the Clean Power Plan, all but renounced the structure of the Clean Air Mercury Rule. That is the emerging United States government’s current position. I didn’t see anything even acknowledging that fact, let alone switching views again on a [inaudible 00:34:10] standard there in this proposal. And so, I do think that EPA doesn’t really have any meaningful precedent to point to, and it is in serious trouble here.


Daren Bakst:  So a couple people have asked questions regarding the Loper case. And I want to just make sure I ask it the way they framed it. Well, basically, the question is: If the Court revises Chevron or overrules it in the Loper Bright case how will that outcome affect the forthcoming litigation regarding this rule? Anybody have any thoughts on that one?


Justin Schwab:  Yeah. I’m happy to briefly speak to that. I think the area in which abrogation of the Chevron doctrine might be most problematic for EPA is in its construction of the word “cost,” and specifically the phrase “that when EPA determines what is the best system of emission reduction that has been adequately demonstrated, it needs to take into account ‘the cost of achieving such reduction.'” 


EPA, in this proposal, says that this is “plainly”—I think is the adverb it uses—”plainly” means that Congress is speaking of the cost to the regulated company. Well, it doesn’t say any such thing. EPA is acting as if it says, “the cost of compliance.” That’s what other provisions in the Clean Air Act, like the Title II car standards, say. That’s not what it said here. I don’t think that’s the best reading of the statute. I don’t even believe that’s a plausible reading of the statute to look at cost and subtract out the subsidies and pretend those aren’t real societal costs. 


Now, EPA is not explicitly invoking deference here. I don’t think. The solicitor general of the United States, to my knowledge, hasn’t filed a brief invoking Chevron deference in years, so I don’t think that — if the Supreme Court were to leave the Chevron doctrine in place, I don’t think that would help EPA particularly. But if they were to strike it down on issues like what that cost language in the statute means, I think that would heap another stone on the pile that they’ve got to lift here.


Daren Bakst:  Okay. So why don’t we go on to another question? 


I’m just now getting to — on the other big question, which is the best system of emission reduction. So I’m going to state that language that Jeff highlighted earlier. And I’m just going to ask all of you: Is the EPA correct that the proposed standards, the emission guidelines, reflect the best system of emission reduction that, taking into account costs and energy requirements and other statutory factors, is adequately demonstrated? So let me just start with — let’s start with you, Jeff.


Jeffrey Holmstead:  Sure. I would add to what Justin said about Chevron deference. I think the term “adequately demonstrated” is also a key term in addition to the cost issue that Justin raised. So I don’t know that the Loper decision in any way will seal the fate, one way or another, but it obviously would, I think, suggest that the Court is not inclined to uphold fairly aggressive interpretations of the statute, and I think in particular on this question of what has been adequately demonstrated. 


I think EPA has two big problems. One is it has to mean something. And the idea that “adequately demonstrated” means something that EPA believes will come into being at a reasonable point in the future, I think it’s a hard case to make. And I just point to two things.


One is, try as they might, they can’t point to any gas-fired plant anywhere in the world that, on a commercial scale, has ever actually employed CCS. They rely — they do mention a small slipstream that was in place for a little while in the U.S. They mention a number of projects that have been announced but not yet funded or built. So I think that, in and of itself, is an issue. 

I think the other big problem is the things that you can do at a power plant to capture your CO2 emissions don’t actually reduce them. You need to have a way to transport them. You need to have a way to inject them into the subsurface. And that system, far from being adequately demonstrated, I think, is very much being called into question. Anybody who follows the news knows that even in states that have typically been friendly to business, there’s been a lot of opposition to any CO2 pipelines. And the idea that we would have, by 2030, a system in place, not only to transport, but to sequester millions of tons of CO2 emissions from coal-fired power plants is just hard to — it’s just inconsistent with reality. This administration has said that it’s fully in favor of CCS, but it has not managed to permit even a single sequestration site. And, as far as I know, I don’t know that there are any. 


To have a sequestration for a power plant, you need to have what’s called a Class VI well. I don’t think any of the hundreds of proposals that have been submitted to EPA — no, that’s not true. There’s two that would accommodate a coal-fired power plant. The permits have not been granted yet, but the vast majority of those are for industrial sources and not for the power sector. 


So this broad system of emission reduction that includes not just the capture equipment but a system of pipelines, a system of injection wells, is certainly not in existence. And I think a lot of people are skeptical that the time frame — well, I’ll add myself to that list. There’s no possible way that system will be in place by 2030, even if the rule is finalized today, and much less — so anyway. I think they have a real problem showing that this system for emission reduction has been adequately demonstrated.


Daren Bakst:  Jeff, I’m glad that you brought up the pipeline issue because that’s one of the questions from our audience member. So you answered that. 


Kevin, let me turn to you. 


Kevin Poloncarz:  So, as I mentioned earlier, EPA has long interpreted this provision of the statute to provide it the ability to reasonably project out into the future about the availability of technology. The guardrails that the D.C. Circuit has provided are that they can’t engage in crystal ball gazing. And they can’t just base this upon pure conjecture or make just speculation. But they can look out toward the development of technology, even when it’s not applied to a particular source category. When they decided that SERs were appropriate for industrial boilers, there were none in the U.S. that had ever used SCRs, although they were used for utility boilers.


And so, CCS is an available technology. It’s been used in the U.S. for decades. Class VI wells exist. There are Class VI well applications on file. And I grant you, Jeff, that there are significant challenges with building out all this infrastructure in the time frame. And that needs to be a significant effort put forth by DOE, by EPA, to overcome so many of the barriers, including the hostility that folks have towards any type of pipeline, in order to allow this infrastructure, whether it’s for hydrogen or CCS. And I definitely, of my conversations with EPA, have stressed to them that they need to play a leadership role if this rule is going to survive in ensuring that this infrastructure can be deployed on a time frame. 


And what is adequately timed? Is it 2030? Is it 2035? Is it 2040? Those are questions that EPA is going to be grappling with in response to the comments they’ve received, which have pointed out that there are significant challenges.


And Justin alluded to this earlier. There are some arguments that CCS isn’t even inside the fenceline technology because it requires the coordination of all these other parties. My view is that the Supreme Court afforded the room for EPA to define a technology based upon the needs of — for infrastructure to evolve outside of the fence line of the plan. I think that dichotomy inside the fence line/outside the fenceline really fell away in that argument and is really irrelevant. It’s really about the availability of the technology. 




Jeffrey Holmstead:  Daren, I’m not the moderator, but can I ask a quick question?


Daren Bakst:  Sure.


Jeffrey Holmstead:  The case law that Kevin refers to is very old D.C. Circuit case file that went from the ’70s and the ’80s. I’ve wondered whether EPA puts that at risk by taking this position. Because, if you believe that this is a big enough case to go to the Supreme Court, the Supreme Court may adopt a less flexible reading of what it means to have something that’s been adequately demonstrated. 


And I assume that’s something that EPA thought about, but they have favorable case law that they’ve used in cases that Kevin mentioned. For example, with SCR, even though it hadn’t been used on industrial boilers, EPA was — that was a reasonable projection. But I do wonder whether that favorable case law could be put at risk by taking this position here. And we’ll have to see.


Justin Schwab:  And I think it will be. 


And just to speak to one aspect of the case law, Kevin correctly identified that crystal ball inquiry is the no-go line. EPA, the D.C. Circuit has said, can look reasonably to the future—albeit it’s talked about two or three years, as opposed to 15 or 20—but it can’t engage in crystal ball inquiry. Well, EPA never stopped in this proposal to think, “What is crystal ball inquiry?” 


Well, if you do the case law research, that phrase the D.C. Circuit picked up from a — in 1973, in one of the first—maybe the first 111 case—well, it picked up “crystal ball” from a NEPA case from a year before. And, in that NEPA case, the court rejected challenges to a Department of Interior NEPA analysis because that NEPA analysis failed to consider alternatives that wouldn’t come into existence until 1980, so eight or so years from the action taken, and said, “You’re not required to engage in that kind of crystal ball inquiry eight years out to the future.” 


Well, if that’s not required in a NEPA analysis, a fortiori, twice that time length, cannot be appropriate to impose as a regulatory requirement. So I think the crystal ball prohibition is squarely in play here. Even if the Supreme Court doesn’t disturb any of that case law, this case law, properly read, does not permit this kind of rule. And, of course, as Jeff notes, the Supreme Court has never spoken meaningfully to what 111 permits and doesn’t permit here, even after West Virginia. EPA is at risk of losing all of this case law and constricting its authority far beyond what it thought it was before it engaged in any of this adventurism.


Kevin Poloncarz:  Respectfully I’ll just say that I have clients who are putting hundreds of millions of dollars on the line for CCS and the hydrogen technology. And, usually, companies that have shareholders don’t put that type of money on the line based upon crystal ball inquiry.


Justin Schwab:  And I would similarly respectfully say that that’s all well and good. And hundreds of billions of dollars of subsidies under this spending clause have now been deployed. 


I question, though, that if this really is as “real and available,” albeit 15 years from now, a future as that rule posits why the need for a stick? Why the need for the “trigger,” as EPA calls it, to overcome hostility, as you said, to pipelines and so forth and sort of fiat this into existence if all is well and good as a business matter based on these subsidies?


Daren Bakst:  Let me get to a — not a related question, I guess, to that. So the EPA uses the IRA subsidies. And, Kevin, you brought up the 45Q tax credit before. And they do rely on that a lot to help justify the feasibility of the technology that would be needed to be adopted. Is this appropriate? 


And then, secondly, the EPA is required — and this was also brought up a little bit. The EPA is required to take into account costs, but it fails to count for the subsidy cost to taxpayers. And do you think that’s problematic?


So is it appropriate to rely on this 45Q tax credit and other subsidies justifying technology? And it is kind of appropriate to not kind of like look at costs as just as impacting the regulated community as opposed to the cost to taxpayers? 


And, Justin, let me go to you on that one.


Justin Schwab:  This is very problematic, and I think it’s potentially fatal to the rule. EPA explicitly says that it’s determining the carbon capture clears the cost analysis, which is texturally acquired because of the availability of these increased subsidies. And it all but says that for “low-GHG hydrogen” also. 


Again, the phrase is “the cost of achieving the emission reduction” or “the cost of achieving such reduction” is the literal words. And EPA says, “By its terms, this provision makes clear that the cost that the EPA must take into account is the cost of the affected source of the system.” But the provision says no such thing. The D.C. Circuit case law, the early case law, interpreted this term to include any number of broader considerations beyond direct compliance costs, including consumer costs. So EPA is, again, just way out over its skis here. And without this theory, the whole thing collapses. 


And, just as a matter of policy and logic, it sort of has to be that way. If the sticker cost to the regulated company is massively subsidized by tax monies, that’s not free money. It’s coming from somewhere. This is like saying, “My parents have just bought me diamond-studded training wheels, so now my ability to ride a bike has been adequately demonstrated.” It just doesn’t make any sense. 


And EPA, in a bit of desperation in the proposal, points to a forestatement from Representative Pallone after the IRA was passed and characterized this as saying that Congress expected and intended that these subsidies would be plugged into the cost equation for a 111 standard. Of course, Congress said no such thing. One member said that after the bill was enacted. And, in fact, if you read Representative Pallone’s full remarks, he says, “Why this is such a great thing is because there are alternative forms of generation which will not be similarly burdened by these new regulations. And so, it will improve their comparative advantage.” 


And I think that gets us to the pretext question. I think that, with all respect to EPA and to its proponents, we are not operating on a blank slate here. We saw what was forbidden by the Supreme Court, which was attempting to shift the grid’s fuel mix as such. And we’re just coming right back in here with this. In form, it’s different, but the goal is clearly the same. 


Administrator Regan was quoted as saying, during the comment period — I’m quoting directly from his words as reported by a new article: “We are working on a proposed power plant standard in the United States that helps us to transition from heavily fossil fuel resources to clean resources.” I think that is the patent attempt of this proposal. And I think pretext does come into play here.


Daren Bakst:  Thanks, Justin.


Kevin, we turn to you on those questions.


Kevin Poloncarz:  Okay. EPA has typically looked at the cost of the regulated industry. And the case law speaks that the cost can’t be exorbitant to the industry such that it would be incapable of surviving. And so, it is, in my view, perfectly appropriate for EPA to look at the effect of IRA subsidies on the availability of the technology. And, frankly, we’re seeing that. We’re seeing projects get proposed because these subsidies are available. For EPA to blind itself to that would be arbitrary rulemaking. 


In their regulatory impact analysis, of course, they’re going to consider the full societal costs associated with relying upon these subsidies. But that’s a different analysis than determining whether or not the technology is available, adequately demonstrated for an industry to apply to achieve emission reductions.


Jeffrey Holmstead:  And just one quick comment. And that is, this was something else that surprised me about the proposal. If you believe EPA’s social cost of carbon, the total society cost is justified. And I think — so I don’t know why they argued that the only cost that matters is the cost of compliance. I think that’s a reading of the statute that’s pretty hard to justify. And I agree. In and of itself, I think that could be enough to overturn the rule, even without getting into some of these questions that the agency didn’t properly consider the cost of the rule and instead focused only on a small part of the cost.


Justin Schwab:  I apologize for interrupting, but I would suggest since this is a Federalist Society event that we really should spend the last few minutes discussing the federalism implications on the state plan existing source side. 


Daren Bakst:  Justin, you’re anticipating what I was going to ask next. Thank you. So that is the next question, actually, we’re going to get to, a stipulated question, so I’m going to do that. 


Section 1(d) of the Clean Air Act, it governs existing source emissions, includes a major role for the states, unlike Section 111(b), governing new sources repeating f regulated sources directly. Do you think this rule violates the so-called cooperative federalism envisioned in the Clean Air Act? 


And, Justin, I’ll just go to you with this issue. 


Justin Schwab:  This proposal does violate the federalist nature of the text of Section 111(d). It also violates the underlying clear statement requirement, the background principle of statutory interpretation that requires just a clear statement of congressional intent to allow an agency to invade an area of traditional state sovereignty. 


Federalism is a shoe that didn’t drop in West Virginia because, there, the Court didn’t need to get into the state-planned side and the state latitude side in order to dispose of the Clean Power Plan. 


As an aside, Justice Kagan’s ostensibly textualist dissent in West Virginia doesn’t talk at all about the source-specific text of 111(d). But I just want to read from 111(d). 111(d) commands EPA in unusually stark terms: EPA “shall permit the State in applying a standard of performance to any particular source…to take into consideration, among other factors, the remaining useful life of the existing source to which such standard applies.” This is very broad, deferential federalist languages to the states that when they look at a particular plant, they’re allowed to take into account that particular plant’s characteristics when seeing whether they want to be less stringent. 


The EPA hates this language. In three currently pending proposals, it’s proposing to suffocate the state prerogative. That’s the pending oil and gas methane rule also under Section 111. Its finalization is rumored to be imminent in advance of this fall’s international climate conference, also, the pending revisions to the implementing framework regulations governing how these rules work generally, and now this one. In each of these, EPA proposes to require that a state make a finding that EPA’s presumptive standards cannot reasonably apply to a particular source before they’re less — before they establish a less stringent standard. That’s nowhere in the statute. They propose to require an extra process when they do that. That is nowhere in the statute. But none of this applies if the state wants to be more stringent, so it’s a blatant [inaudible 00:55:17. It’s very obvious what they’re doing.


Now, EPA has a shiny object here to distract people. It says, “Oh, but we’re proposing to allow cap and trade as a compliance mechanism, averaging and trading between different power plants. The 2019 ACE Rule didn’t do that. We’re the real federalists.” Don’t take your eye off the ball. EPA is also proposing that it has the authority to set a state-wide aggregate reduction requirement, and it will brook no deviation from that. 


EPA cannot suffocate an express grant of state latitude, claim that it’s making up for that by inserting the very same cap-and-trade scheme that the West Virginia court struck down, while still saying it ultimately gets to dial down that whole level while treating a state, not as a sovereign co-regulator but as nothing more than a giant source of greenhouse gas emissions.


Daren Bakst:  Jeff, let me just give you a chance to respond to that.


Jeffrey Holmstead:  Well, I would say that there’s nothing in this proposal, in the 111(d) proposal for fossil fuel generating units, that runs roughshod, in my view, over the remaining useful life or other factors. States have the ability to consider this. They will be able to consider delaying the technology or the requirements if the technology should not be available if there should be infrastructure concerns. 


And it’s also — what we have is a proposal, and EPA has received a lot of feedback. And so, I would expect that they’re going to take that feedback into account in defining what are the contours of remaining useful life or other factors. But nothing in the way this proposal is presented just abnegates the state’s ability to apply those factors in determining how a standard applies to an existing source. 


And one thing the Supreme Court made clear is that EPA gets to decide what is the standard. To say that then they would just look elsewhere and say the state gets to just come up with their own standard and make it up as it goes along, that would be silly. So, in my view, from my perspective, the Supreme Court affirmed EPA’s role in actually setting the standards. And how the state then implements it, that’ll be seen.


Justin Schwab:  Just a point of clarification. The EPA identifies the best system of emission reduction that isn’t adequately demonstrated. It is the state that establishes a standard of performance for particular existing power plants.


Jeffrey Holmstead:  Take a look at West Virginia, Justin.


Justin Schwab:  Take a look at 111(d), Kevin.


Daren Bakst:  Somebody just asked a question about reliability to a policy. Question really quick, and then we’ll buzz out. 


Some people have asked about reliability, and I was interested in asking about reliability. First of all, does the — and I’ll just ask it quick as both a policy question and a legal question. Does the EPA consider, within their analysis, the reliability impact of this proposed rule at all? 


Just quickly, can somebody respond to that? And what do you think the policy implications of the rule would be for reliability? I don’t know. Jeff, do you have any thoughts on that?


Jeffrey Holmstead:  So there’s no explicit analysis of reliability in the proposal, which is a bit surprising. I think EPA’s view is, “If there’s any reliability problems that come up, well, we can fix them in the future.” I hate to be so cavalier about it, but anybody who is at all involved with reliability in the power sector and some of the concerns that have been raised has to acknowledge that this raises serious reliability concerns. And I think the view at EPA, certainly among the political leadership, is, “That’s something we can deal with in the future. For now, we just need to have this aggressive rule out there.”


Daren Bakst:  Let me — let’s look to the future a bit. When would we expect this proposed rule to be finalized? I don’t know if anybody has any thoughts on that.


Jeffrey Holmstead:  Well, the regulatory agenda — the regulatory agenda, I think, says March of next year, so it would be out fairly soon. It would lickety-split by EPA standards.


Daren Bakst:  And they would probably want to have it finalized before it could be subjected to the Congressional Review Act presumably. So March would likely be safe for it.


And let me ask one other question we’ll get forward. Well, we’ve kind of, in many ways, discussed this to some extent. “I know that predicting what the courts will do is hard, but what do you think the likely legal outcome for this rule is going to be in the courts?” I know it’s tough, but just given what we may have already come to know where you guys would kind of land on this, but any clear thoughts on it?


Jeffrey Holmstead:  Is that to me?


Daren Bakst:  Whoever. Kevin, you want — what do you think?


Kevin Poloncarz:  Justin, I’m interested to hear your perspective.


Justin Schwab:  I think if the EPA finalizes this rule, anything like in its proposed form, I think there’s a very significant chance that it will receive a preliminary injunction, potentially from the D.C. Circuit, and if not, then from the Supreme Court. I think that there is potentially a very easy way to explain to the Supreme Court that, at least on the “low-GHG hydrogen” side, this is just the Clean Power Plan with an extra step. Instead of requiring fossil fuel-fired power plants to subsidize directly their competitor’s generation, this BSCR would require them to certify that their fuel is generated by their competitor’s generation. It’s one more step. It’s the same thing.


Daren Bakst:  Let me just stay a few more minutes. I want to give each of you just, like, one minute. I’ll just go — Jeff, we’ll start with you. And we’ll just go, Kevin and Justin. 


Just anything we’ve missed? Anything you want to add? So, Jeff, start with you.


Jeffrey Holmstead:  So I want to just step back. And, I think, the big picture here — I think what we’ve seen here and what we saw in the Clean Power Plan is, if EPA did something that was sort of squarely acceptable under the Clean Air Act, they wouldn’t get very much in the way of emission reduction. And so, I think, in both cases, it’s caused them to sort of swing for the fences. We saw that that didn’t go so well for the Clean Power Plan, and I think I’m with Justin. We’ll see what the final rule says. I’m sure they will make some — they will need to make some changes. But, if they finalize something that’s similar to this, I wouldn’t be surprised if it’s stayed by the D.C. Circuit, and if not, by the Supreme Court. And, ultimately, I just think for many of the reasons we’ve discussed it is unlikely to stand up in court. 


Now, EPA’s answer to that would be, if you believe their analysis, almost all of these productions are going to come anyway. Their baseline shows that the vast majority of these plants shut down without this rule. So maybe if that’s what they really believe, their units — this wouldn’t have such a big impact anyway. But I think it’s in legal jeopardy.


Daren Bakst:  Kevin, go ahead. Anything we missed?


Kevin Poloncarz:  I’ll return to what I started with: that not every case is extraordinary. It can’t be the case that every case implicates major questions, and here you don’t have the CDC engaging in landlord/tenant law. You have EPA setting emissions standards fairly in its wheelhouse. And so, my view is that this rule — it’ll change in its final form for sure, so it would be idle for me to speculate on whether it’s going to survive or not, but I don’t think it implicates major questions.


Justin Schwab:  And I would just say that I don’t think this is at all a good-faith attempt to abide by West Virginia. West Virginia, the majority in footnote 3, said that Justice Kagan’s dissent “suggests that EPA could bring about the same result of generation shifting by, for example, simply requiring coal plants to become natural gas plants,… of course, EPA has never ordered anything remotely like that, and we doubt it could.” Less than a year later, EPA proposed to do just that, and, in fact, more so, because rather than requiring fuel shifting over to gas, they’re requiring fuel shifting to low-GHG hydrogen, which simply doesn’t exist yet. So I think that this is very easily portrayed as EPA being in all but open defiance of the high court, and it’s regrettable that the agency is going down this path.


Daren Bakst:  Thanks so much. 


First of all, I just want to say how important I think it is. And I want to echo what Kevin said about having kind of an open discourse on these issues. And that’s what I think is so great about The Federalist Society, so I do really appreciate that. And Jeff, Justin, and Kevin, just all of you, thank you so much for sharing your expertise today on this important role.


And, of course, we want to thank all of you for participating in today’s program. Or, if you’re watching the recording of this event, thank you. We look forward to seeing you again soon.


Sarah Bengtsson:  Thanks, Daren. Just to echo what Daren said on behalf of The Federalist Society, thank you to our speakers today for sharing your time and expertise with us today and to the audience for tuning in. 


If anyone is interested in finding more content like this, you can check out our website at or follow us on any major social media platform @fedsocrtp to stay up to date. 


Until next time, we are adjourned.




Conclusion:  On behalf of The Federalist Society’s Regulatory Transparency Project, thanks for tuning in to the Fourth Branch podcast. To catch every new episode when it’s released, you can subscribe on Apple Podcasts, Google Play, and Spreaker. For the latest from RTP, please visit our website at




This has been a FedSoc audio production.

Jeffrey Holmstead


Bracewell LLP

Kevin Poloncarz


Covington & Burling LLP

Justin Schwab



Daren Bakst

Director of the Center for Energy and Environment and Senior Fellow

Competitive Enterprise Institute

Energy & Environment

The Federalist Society and Regulatory Transparency Project take no position on particular legal or public policy matters. All expressions of opinion are those of the speaker(s). To join the debate, please email us at [email protected].

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